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Stock markets in Europe and the US slumped today - it has begun.
For the historical record, on Sept 1st the stock markets stood at(roughly):
FTSE 100 - 4920
DJIA - 9550
Nikkei 225 - 10500 (topped at 10800)
Where are you getting your information concerning a soon to be huge depression? I don't hear any mention of this disaster in the German media.
There won't be any huge depression unless china disappears. As it stands that looks unlikely in the near future.
First things first - China is fast deflating. Watch their economy experience extreme pain. Don't be fooled by reports of economic growth - they substantially over-report economic activity. And watch the Shanghai exchange: down from 3500 to 2850 recently. Falls are done in shudders - there will be up weeks - but the end result is devastating all the same. Europe and the US will go down a lot until June 2010.
Now, my sources of information:
You can get a free subscription to get increased access to their materials, but much of it is premium unfortunately. I have followed their forecasts this year and everything has panned out perfectly. Reading the newspapers just leaves you confused. For example, did you know that the USD goes UP against the GBP when the stock markets go DOWN? Many moves depend on the fact that humans display distinctive herding patterns that are fairly predictable.
Alternatively, read http://yelnick.typepad.com/ for his reflections on Elliott Wave.
Yes, I do know there are many different opinions out there. If you want to read a good selection of them go to http://www.marketoracle.co.uk/
Remember: people thought that http://www.housepricecrash.co.uk/index.php was a crazy site for loons - until everything they wrote became true.
The fact is CREDIT has become a huge part of life in western democracies since 1980. This crisis wasn't caused by a few bankers behaving badly (though they did), it happened because democratically-elected politicians going back over almost 30 years have consistently stuck to ever-increasingly easy money policies. They acted like teenagers at a party - unable and unwilling to turn the music down until the police arrive. Even the sight of a police car fast approaching does no good, the policeman has to be at the door.
We now have to de-leverage a generation's indebtedness. The VALUE of the assets we hold has been pumped up by astonishing levels of debt maintained by a pyramid-style credit scheme. Humungous negative equity, but for the whole economy. This last happened in 1929, but not to the same extreme extent. (I'm talking here about the ratio of total indebtedness to GNP.) It was unwound by massive defaults on debts. The difference now is that, unlike in the 1930s, we have a worldwide problem and sovereign debt is under pressure too. Britain devalued sterling by 40% in 1930 (1931? - can't remember) - which is precisely what it has done in the last few months.
Debt defaults are being blocked by last-ditch attempts of politicians who simply do not understand what they are doing. Japan suffered from the same failed policy all through the 1990s - their "lost decade" - despite great export figures. They had extreme quantitive easing and it did them NO GOOD whatsoever.
By the way, remember how printing endless amounts of money is supposed to lead to inflation or hyperinflation? (Germany 1920s) Do we have that now? No. Why? Because the market has been trying desperatly to deflate. All this extra credit - now panic-stricken extra money - has simply gone into bubble after bubble over the last 10 years. It caused the dot.com boom, the housing boom, the stock market boom, the oil boom. But what comes after boom? Bust. The next little boom is perhaps going to be in gold - it might hit $1050 soon - or dollars ($1=1.10EUR?) I don't know. But seriously, very bad things lie ahead of us. A once in a lifetime bust. The NYSE regained its 1929 levels in ... 1954. And you want to hold shares with that risk level? Really?
"First things first - China is fast deflating. Watch their economy experience extreme pain. Don't be fooled by reports of economic growth - they substantially over-report economic activity. And watch the Shanghai exchange: down from 3500 to 2850 recently. Falls are done in shudders - there will be up weeks - but the end result is devastating all the same. Europe and the US will go down a lot until June 2010."
Yes because of their political situation and huge population but they have an infrastructure that can cushion against a lot of blows that other countries could not sustain. I think you will be surprised by how robust china is in the face of any economic pressure. As long as China does not change it's political and population make up, the status quo will create stability for the rest of the world.
I also think recovery will vary. For example the UK is hosting the olympics so that's already giving the economy a boost.
Hmmm - Obama's stimulus spending will not help one iota, and China's stimulus spending has been enormous too.
Government spending will simply crowd out private enterprise. This 30-year period of gorging on credit will not be cured by extra borrowing. You either take your pain now, or it will be worse and unavoidable tomorrow.
Oh - ever heard of Credit Default Swaps? No - well you should. They are a real source of worry for central bankers and governments.
It's impossible to predict long term because there are so many variables. At the moment things are picking up somewhat in the UK and from what Ive read in Poland. America seems to have been the worst hit, but everyone I know there has just adapted to the changes and worked in two or three jobs if necessary. The uk will be hardest hit in public services because it will take a few years to repay the huge debt. I reckon if they got rid of all the management consultants that would plug a sizeable gap all by itself.
Gordon Brown, ever the visionary, closed a whole load of JobCentres in 2006. Now in 2009 he has with great fanfare declared that he is investing in "new" JobCentres ...
The Inland Revenue sold off all its buildings - cheaply - to a property company in a tax haven and leased them back for 20 years, with guarantees of profit levels. Moronic or simply corruption?
The Commonwealth Development Corporation used to be about reducing Third World poverty, especially rural and water issues. It got sold off for peanuts, with the new owners (including the old advisors) making a fortune, and has turned its back on rural and water issues to invest in new shopping centres. Moronic or corruption? Certainly immoral Nu Labour at its best.
Consultants, civil servants and politicians keep on jumping from one branch to another after making the "correct" decision on a project, then profit from the situation in terms of cash. And yet Brits stare blankly at you when you say they live in a country rife with high level corruption. Surely not! They don't even comment on the energy sector being sold off to EDF, a company advised by Gordon Brown's brother.
Investors' focus on Warsaw
Plans to invest? Warsaw’s the option - claim foreign investors surveyed by Cushman & Wakefield. The well-known global research company has just published its latest „European Cities Monitor 2009” report.
The Polish capital city classified first among the cities which in the upcoming five years may count on the highest amounts of new investors. While last year there were 28 companies which considered investing in Warsaw, this year the number rose to 36. Warsaw came before Moscow, which was winning the ranking for the last two years, and among others, Bucharest and Prague.
- We are pleased with the results as they show improvement in Warsaw’s image as a possible investment destination for the biggest investment projects - said Warsaw’s Deputy President Jarosław Kochaniak.
Warsaw has also classified on high 3rd position in terms of business climate created by government (here the best were Dublin and Geneva) and in respect of the value for office space in relation to its standards (Birmingham and Leeds came respectively first and second in the category).
In the overall ranking i.e. covering all the criteria (standard of living, quality of telecommunication services, location, accessibility and workers’ reputation, office space renting costs, etc.) Warsaw ranked on 23rd position, coming before Copenhagen, Vienna, Moscow and Athens. In this year's ranking again the best was London.
The underlying data was researched independently by Cushman & Wakefield. 500 senior executives from leading European companies gave their views on Europe’s leading business cities. (Gazeta Wyborcza / um.warszawa.pl)